<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=669891663901487&amp;ev=PageView&amp;noscript=1">
Skip to content
Book a Demo
Book a Demo

    Everything You Need to Know About
    Mixed Use Development

    Discover how mixed use developments can help you diversify your CRE portfolio and increase its profitability.

    Mixed Use Development

    What is Mixed Use Real Estate Development?

    Mixed use developments are properties combining multiple uses, such as residential, commercial, retail, or office space, to meet consumer desire for community-oriented neighborhoods, optimizing land-use efficiency, and mitigating risk for investors. Developers can pursue many types of mixed use properties, including retail and residential districts, mixed use hotels, and live-work-play spaces. 

    The Benefits of Mixed Use Development for Investors

    Mixed use developments present an attractive opportunity for investors for many reasons. One of the biggest benefits of investing in mixed use is the diversification of revenue streams, as buildings with multiple uses reduce the need to rely on any single source of tenant profit and therefore mitigate risk. For example, a building with commercial, office, and residential uses will continue to profit even as office assets remain in decline in the post-pandemic era. In addition to lowering risk, mixed use properties offer higher incomes, greater cash flow, longer leases, and lower competition, further increasing revenue. 

    Mixed use properties are also considered positive long-term investments, as tenant preferences continue to trend toward sustainable buildings in walkable and well-connected neighborhoods. Renters want to live in densely populated and centralized areas with direct access to public resources such as parks and libraries, and mixed use buildings help promote the inclusive and sustainable communities residents are increasingly seeking out. 

    Potential Drawbacks
    of Mixed Use Development

    vectorstock_19187904 (1)

    1. Higher Upfront Costs

    In comparison with a single-use building, a mixed use development will have higher upfront costs and require a greater capital investment. Mixed use projects are more complex in terms of infrastructure, amenities, and services, resulting in increased construction costs, greater regulatory compliance costs, and operational complexities. As a result, mixed use projects can be more difficult to finance and may require you to pursue alternative funding sources such as Low-Income Housing Tax Credits (LIHTC) funding or Transit-Oriented Community incentives. 
    vectorstock_15666923 (1)

    2. Complex Construction + Longer Project Timelines

    The second drawback for developers is that the design and construction of a mixed use project is more complex and challenging, increasing the potential for timeline delays and cost overruns. Development teams need to be prepared to manage coordination with stakeholders, an intensive zoning and building code compliance process, and extensive vendor procurement and management. Developers should also be aware that mixed use projects in urban areas will be subject to greater regulatory guidelines than other projects and plan timelines accordingly.
    vectorstock_47586124 (1)

    3. Increased Need for Market Research

    Developers need to ensure a mixed use development has the correct tenant mix and uses are not in conflict with each other. For example, conflicting expectations between commercial and residential tenants can result in lower occupancy rates, endangering the property's profitability. You should also conduct due diligence in choosing a market for a mixed use project. Economic uncertainty, shifts in consumer desires, and changes in local demographics can impact the success of a mixed use project. For this reason, investors need to conduct thorough market research and make sure the appropriate demand is available for all the uses combined into a given mixed use property. 

    Even with the challenges outlined above, mixed use development projects remain an excellent way to diversify a portfolio, mitigate investment risk even on complex projects, and help to positively shape the future of neighborhoods. 

    Mixed use properties are considered positive long-term investments, especially as
    tenant preferences continue to trend toward sustainable buildings in walkable and
    well-connected neighborhoods.

    Examples of Successful Mixed Use Development

    Hudson Yards, NYC

    1. Hudson Yards in New York, New York

    Hudson Yards, one of the most complex development projects in the city’s history, is a large-scale mixed use development project combining residential, retail, commercial, office, and cultural spaces. Hudson Yards is a place for the city’s residents to live, work, play and dine, and has been slated for completion in two major parts. The Eastern Yard contains eight new buildings, including residential and commercial skyscrapers, a public garden, a mall, and the Shed Cultural Center. The Western Yard is still underway but will also have residential, office, and retail space, as well as an elementary school. The space is also home to the Edge, the city’s highest observation deck, making it an attractive tourist destination. 
    Austin, Texas

    2. The Domain in Austin, Texas

    The Domain, sometimes referred to as a second downtown of Austin, Texas, features a mix of places to live, shop, eat, work, and explore. The Domain’s 100+ retail locations and shops are intermingled with open park space and residential housing to serve the North Austin area. The mixed use development has largely been successful due to its strategic offerings in terms of retail - the neighborhood has everything from small boutiques to fitness studios - and its accessibility to the rest of the city via public transportation and bike lanes. The neighborhood also features several hotels, allowing the area to draw both locals and tourists alike. As a result, the mixed use district has positively contributed to Austin’s economy, creating jobs and generating tax revenue, and serves as a model for other Sun Belt communities pursuing revitalization efforts. 
    Portland, Oregon

    3. Pearl District in Portland, Oregon

    The Pearl District in Portland, Oregon is a former industrial area north of downtown Portland transformed by mixed use development efforts. The area - now rich with restaurants, galleries, and trendy boutiques - has revived the city’s cultural scene and helped address ongoing housing shortages. The Portland Design Commission recently greenlit a new mixed use tower, which will include 381 units of housing in addition to amenity decks and ground-floor retail. With input from the Portland Design Commission, a 25-foot wide pedestrian and bike path will be integrated into the project, demonstrating how these projects can complement larger urban planning efforts. 

    High-profile mixed use development projects have the added benefit of being a destination spot for tourists and residents alike. However, many mixed use developments are successful on a smaller scale, combining residential, retail, or office space to help shape high-density, well-connected, and sustainable neighborhoods.

    How to Invest in Mixed Use Development 

    Investing in mixed use development projects can be lower-risk than in single-use projects provided you conduct the correct market research and due diligence. Understanding the four major types of mixed use investments - main street, live/work, residential/office, or mixed use essentials - is important before choosing a project and locale. Be sure the mixed use building you’re investing in is a mix of uses that makes sense, is aesthetically pleasing, and is located near attractive public spaces with desirable infrastructure for tenants. When it comes to retail spaces, seek out adaptable and versatile options. Combining uses can potentially give commercial tenants less ability to reimagine a space to fit their needs, so the more open and flexible your retail space can be the less risk of occupancy issues your property will have.  

    Mixed Use Development
    Project Checklist

    Before moving forward with the complex construction process, you should create and consult a mixed use development project checklist. Here are the key objectives
    you should include:

    icon-1
    Conduct Market Analysis, Due Diligence, & Site Selection

    Choosing projects in high-demand, job-rich areas with access to public resources and transit can help further offset the risk of taking on a project of this scale and complexity.
    icon-4
    Begin the Financial Planning & Budgeting Process

    Identifying potential risks and addressing them before things get out of hand is important to avoid major budget overruns and make sure you don’t derail project timelines.
    icon-3
    Obtain Zoning and Building Code Approvals

    Establishing positive relationships with relevant stakeholders will allow you to move more quickly through the regulatory process and seek out any additional guidance as needed. 
    icon-4
    Oversee Construction and Project Management

    Using technology to facilitate vendor selection will empower you to drive down costs by eliminating scope gaps and proactively flag cost-saving opportunities on every line item.
    Establish Operations and Management

    Finding professionals with experience managing a property with complex requirements will help ensure your property delivers returns on investment after stabilization.

    A Deeper Dive Into the Mixed Use Development Checklist:

    #1 Conduct thorough Market Analysis, Due Diligence, and Site Selection 

    The pre-development phase is vital for a mixed use project, and your team should be sure to conduct proper market analysis, due diligence, and site selection before moving forward with any given project. Your market analysis should track demographic trends, economic activity, consumer behavior, and whether or not similar projects are slated for the given area that would increase competition. The analysis should also provide projections of management costs for the building after stabilization, and calculate important metrics such as the building’s cap rate. Choosing projects in high-demand, job-rich areas with access to public resources and transit can help further offset the risk of taking on a project of this scale and complexity. 
     

    #2 Begin the Financial Planning & Budgeting Process

    Financial planning is an essential part of your mixed use development project checklist, allowing you to ensure a project can generate significant ROI that justifies the initial investment costs. Mixed use projects combine retail, commercial, office, and residential asset classes, and each will require a different timeline for generating returns. Ensuring all the uses included in your mixed use project pencil will be one of the most important steps you’ll take in pre-development. 

    Budget allocation will also be key to ensuring your mixed use project is successful. Even though mixed use developments lower risk for investors because of asset diversification, the added structural complexity in the construction process can pose obstacles in the early phases of the development life cycle. Identifying potential risks and addressing them before things get out of hand is important to avoid major budget overruns and make sure you don’t derail project timelines.
      

    #3 Obtain Zoning and Building Code Approvals 

    Zoning and building code permitting are more complex on a mixed use development project. Keeping your project in compliance with zoning, building, environmental, and other regulations is necessary for bringing a project in on time and on budget. Keeping a detailed record of your compliance documentation, including permit applications, approvals, inspection reports, or other key documents, simplifies the regulatory process for your team and ensures you are ready for inspections and audits. Establishing a positive relationship with local planning boards, zoning departments, and other relevant stakeholders will also allow you to move more quickly through the regulatory process and seek out any additional guidance during the process as needed. 

    #4 Oversee Construction and Project Management 

    Hiring an experienced project management team is important for guiding your project through construction to stabilization. Developing a proper construction timeline, including key milestones and deliverables, will help ensure your mixed use project is ultimately profitable. Vendor selection is also important as you look to keep costs down without sacrificing quality work. Leveraging technology to facilitate vendor selection will empower you to drive down costs by eliminating scope gaps and proactively flag cost-saving opportunities on every line item. 

    #5 Establish Operations and Management 

    Once a project reaches stabilization, you’ll need to conduct final inspections and provide quality assurance to owners. Depending on who is operating the property long term, it may be your responsibility to help bring on a team to oversee the property. The management of a mixed use property is especially complex, as each use will have unique lease durations, utility requirements, and upkeep protocols. Finding professionals with experience managing a property with complex requirements will help ensure your property delivers returns on investment after stabilization. 

    Make informed, strategic decisions to achieve more predictable outcomes.

    Book a Northspyre demo to learn more about how modern real estate development software can ensure your mixed use development projects are successful, driving down costs and boosting efficiency from pre-development through stabilization.

    Book a Demo